This is a common question when it comes to SEO. There are so many expert in SEO field have different views. We can declare that this is one of the most debatable topics in SEO field. There is no specific answer to this question. All we can give is personal opinion towards the current situation for a website. Personally, I have explained a lot about link building and even tag it differently from SEO on my sidebar. Link building itself is one big topic that needs good attention in SEO point of view. I have written a lot of blog post about link building, backlinks, as well as SEO is all about backlinks and link building.
However, there are others who still believe that onsite SEO and good interlinking between pages are most important factor in SEO. Personally, if I visit a site that is referred from Google for specific terms, I want to see related links and precise contents. Matt Cutts ask SEO pros to treat search engine as human. Deliver data and links that beneficial to the visitors and it will help in ranking too. Interlink all the relevant pages with proper “anchored keywords or keyphrases” on each pages as it will help in ranking and SEO.
Personally, I believe onsite SEO including interlinking internal pages with proper keyphrases are the basic housekeeping. The better onsite SEO with proper contents and interlinks will certainly hold the visitors longer on our site. A small number of relevant backlinks with link building activity will do the magic based on competition level. Again, when we compete with the well SEOed sites that exists for years with thousands of internal pages well linked and adding new contents daily, we need some extra magic. This is where link building comes handy. So, I would say 90% offsite SEO (backlinks) and 10% onsite SEO importance level shares here. What do you think?
Website optimization is a must for your online business.